The Bank’s rate-setters focused on a renewed fall in global oil prices and slower wage growth at home as they voted 8-1 again to keep interest rates at a record low of 0.5 percent.
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Members of the Bank’s nine-strong monetary policy committee (MPC) voted eight to one to leave rates at 0.5%, where they have been since March 2009, in a repeat of voting numbers seen in recent months.
The inter-bank market is quoting sterling-dollar at 1.5157 while your bank will be offering an exchange rate in the region of 1.47-1.48.
The November jobs figure from the Bureau of Labor Statistics was slightly ahead of expectations and meant that the unemployment rate held at its seven-and-a-half year low of five per cent.
Chris Williamson, chief economist at Markit, said: “When presenting its latest Inflation Report last month, the Bank indicated that it did not expect to need to raise interest rates until 2017, due to inflation remaining below target”. The EconoTimes content received through this service is the intellectual property of EconoTimes or its third party suppliers. Indeed, many of its central bank peers around the world have hiked rates in this post-financial-crisis era, only to be forced to cut again within months because their local economies couldn’t handle it.
While the central bank said there was “no mechanical link” between its policy and that of other central banks, it is caught between a European Central Bank that is adding stimulus and a United States Federal Reserve that may be just a week away from the first increase in its key rate since 2006.
The minutes of the meeting showed policymakers concentrated on the continuing subdued inflation environment.
BOE policy makers have been weighing the strength of Britain’s economy against global-growth concerns, including a slowdown in emerging markets and tumbling commodity prices.
“With the Fed’s decision likely to increase financial market volatility and (south) Korea’s household debt rising, I don’t think the BoK would cut interest rates in the foreseeable future as it would exacerbate the problems”, Seo said.
Fresh movement could also be triggered for Sterling on Friday with the release of the BoE/GfK 12 month inflation forecast, which any reduction in outlook set to push the GBP/EUR exchange rate down.
The Bank of Korea has said that even if the Fed raises interest rates, South Korea’s stockpile of foreign reserves and its huge current account surplus will shield the economy from immediate shocks. Average savings interest rates are forecast to increase by 1 percentage point, up to an average rate of 2.3% at the same time.
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Gowler continued: “It’s clear that any rate rise will affect people in different ways, with some people having to balance a rise in mortgage payments as a result”.
